Cabinet Office put the procurement squeeze on UK Government’s top suppliers – part 2

Part 2 – How the programme has operated

We covered the background to the programme to drive value from the biggest suppliers to the UK Government yesterday; today, more around what has actually happened.

The programme has addressed two ‘waves' of suppliers; the first started with the largest and included 19 firms, the second which started a few months later looked at a further 34. It's worth stressing that this isn't just 'outsourcing' firms as has been reported in some quarters; it includes such firms but also providers of IT goods and services, construction, office supplies, vehicles, and professional services. The only rationale for choosing was the size and scope of their business with central civil Government.

The list has however excluded firms who are major providers to local government, health and the devolved sectors. So you won't see providers of social care or drugs or medical equipment in there; or providers of military equipment, hence no BAE Systems, purely because their business is so focused with MOD rather than across Whitehall.

It is worth noting that while data is still lacking in some areas, it has improved to the extent that Cabinet Office has a reasonable view (at least across Whitehall) of where the major spend and contracts sit. So once the list of suppliers was agreed, based on this data, then the process has included a structured set of activities, spanning some months, which can be looked at as five distinct phases.

1.       A kick off meeting with all the suppliers (for each wave) led by Francis Maude, Minster for the Cabinet Office.

2.       A briefing meeting for each supplier with the officials who would lead the negotiations; this primed suppliers to prepare their ideas for cost savings.

3.       A meeting for each supplier with a (pre-briefed) Minister and officials – suppliers presented their proposals and government made an initial response which (my interpretation here) was in most cases 'thanks but you need to come up with more'.

4.       The 'deal room' phase – one or more negotiations with each supplier around the proposals, led by the relevant official (the ‘commercial lead’), ultimately ending up with an agreed MOU.

5.       Cabinet Office continues to monitor (with departments) that savings measures have been implemented.

The commercial leads were selected from amongst commercial or procurement directors from a range of major Departments. Interestingly, most of those (although not all) have significant private sector experience prior to coming into the public sector, which may have proved useful here.

The level of involvement of Ministers is extraordinary; I've never seen this before in 15 years of working in and around government. It wasn't just Maude though; other Cabinet Ministers including Philip Hammond have led the process with particular suppliers, so there are a range of Ministerial signatures on the various MOUs. And they have been involved in detailed briefing meetings with officials before sitting down with the suppliers; they have not merely turned up and shaken a few hands.

There is a real best practice point there for any organisation; if you really want to do this with your suppliers, get visible and substantial backing and involvement from the very top.  That gives you far more credibility with suppliers and shows a sense of purpose, which in turn makes it more likely suppliers will respond seriously and positively.

One of my concerns with this process initially was whether individual Departments would buy into it – I might have been tempted to spend longer building ‘stakeholder consensus’.  But the close involvement of Ministers has I think largely overcome this – the private sector parallel would be if you get the CEO firmly on board, you don’t need to spend quite as much time lining up the divisional MDs!

The proposals made by suppliers and contained in the MOU were categorised by their 'firmness' and the timing of their delivery; tomorrow we'll look in more detail at how that worked, and consider what is emerging in terms of the results and emerging benefits from the programme.

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Voices (5)

  1. Christine Morton:

    Dan the answer lies in the stock price jumps of each of the companies once the MOUs were announced.

  2. Peter Smith:

    Excellent questions -a future in investigative jouranlism awaits you if you get fed up with procurement! You’re spot on in terms of why there’s been some scepticism over the programme I think. But we’ll try and answer some of those questions in part 3 on Monday which will dig into the savings aspect.

  3. Dan:

    I’d like to know just what incentives the suppliers were offered to encourage them. Contract extensions? Further work in other areas? All the suppliers that have announced an MOU have indicated that it would not affect their profits – is this a fact or just a sop to shareholders? If it is a fact, how can they cut their prices without harming their profitability, unless the government is increasing its spend in other areas.

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